Harris Bank goes shopping

Missouri, Ohio, and Wisconsin have takeover possibilities

Harris Bank has the greenlight and the greenbacks to go on shopping spree, if it can find the right targets.

Analysts believe Missouri, Ohio, and Wisconsin offer potential takeover targets for the Chicago-based bank after its parent, Bank of Montreal, said Tuesday it would spend $1.6 billion on acquisitions to expand Harris Bank's Midwestern footprint.

That's in keeping with a growth strategy that started last year, when Harris acquired New Lenox State Bank for $229 million, Lakeland Community Bank ($36 million) and spent $157 million for Mercantile Bancorp, Inc. and Lake Commercial Corp., both in Hammond, Ind.

Tuesday's comments follow those made last month by BMO Financial Group CFO Karen Maidment, who said the company would be looking at acquisitions between $500 million and $2 billion and Milwaukee and Kansas City were possible expansion cities.

One potential property in Kansas City could be Commerce Bank. Its parent, Commerce Bancshares Inc., is the largest bank in Missouri with $14 billion in assets. Harris has $15 billion in assets.

Some analysts suggest Ohio might hold some potential as well.

"I think they could look at things in Ohio -- Huntington, First Merit, Sky Financial" says Denis LaPlante, head of bank research at Keefe, Bruyette & Woods, Inc., who acknowledges that these entities might not be on the selling block and could feasibly fall outside BMO's spending comfort zone.

Analysts say that the Midwest is a good target, as others look toward regions that hold bigger opportunity.

"Now may be a better time to pursue (the Midwest), as the dominant regional banks are looking at more growth markets, like the southeast," says Terry McEvoy, an equity analyst at New York-based Oppenheimer.

"The attractive markets are the metro markets," he says. "Milwaukee would be a natural extension, or Southern Indiana."

Names floated in Milwaukee include Associated Bank, with about a $5 billion market cap, and AnchorBank, a thrift-sector bank based in Madison, with a cap of $638 million and 55 branches in 12 Wisconsin counties.

But the answer may not be in the thrift sector, which traditionally focuses on mortgages and consumer loans. "We are at the tail end of the thrift profits," says Mr. McEvoy. "I would see them focusing on a traditional commercial entity as loan demand picks up."

An expanded footprint wouldn't necessarily exclude Chicago, either. Not that they're necessarily on the selling block, but Mr. McEvoy says First Midwest (with a market cap of $1.57 billion), for instance, is a Chicago bank that could be in BMO's sights.